What Are the Components of an Appraisal?
A home purchase can be the most serious transaction some might ever make. Whether it's where you raise your family, a seasonal vacation property or an investment, purchasing real property is a complex transaction that requires multiple people working in concert to make it all happen.
Most of the participants are very familiar. The most familiar entity in the exchange is the real estate agent. Next, the mortgage company provides the money necessary to bankroll the transaction. And ensuring all aspects of the sale are completed and that the title is clear to pass from the seller to the buyer is the title company.
So, what party is responsible for making sure the real estate is worth the amount being paid? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A certified, professional multi-state appraiser with 26 years experience, Michael Church, Cert Res RD8306, will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first task at Michael Church Appraisals is to inspect the property to determine its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.
Back at the office, an appraiser uses selected approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we gather information on local construction costs, the cost of labor and other factors to figure out how much it would cost to build a property similar to the one being appraised. This figure often sets the upper limit on what a property would sell for. It's also the least used method.
Appraisers can tell you a lot about the subdivisions in which they work. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the real estate in question. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Michael Church Appraisals, we are an authority when it comes to knowing the worth of particular items in Naples and Collier & Lee County neighborhoods. This approach to value is commonly awarded the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third method of valuing real estate. In this situation, the amount of revenue the real estate produces is taken into consideration along with income produced by similar properties to derive the current value.
Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of a property's value. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Michael Church Appraisals will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.